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Sainsbury's blames cautious shoppers for fall in Christmas sales Sainsbury's Christmas sales hit by struggles at Argos
(about 7 hours later)
Sainsbury’s has blamed cautious shoppers and a cutback on Black Friday discounts at its Argos chain for a bigger-than-expected fall in sales over Christmas. A fall in sales of toys and electrical goods at Argos after a cutback on Black Friday discounts dragged down trading at Sainsbury’s over Christmas.
Sales at established stores slid by 1.1% in the 15 weeks to 5 January, driven by a 2.3% drop in total sales of non-food household goods, mainly sold at Argos, and a 0.2% fall in clothing sales. Sales at established stores slid by 1.1% in the 15 weeks to 5 January, driven by a 2.3% drop in total sales of non-food household goods, mainly at Argos. There was also a small decline in clothing sales.
Sainsbury’s said sales of toys had been particularly disappointing over the festive period. The overall market declined by more than 10% as parents switched to buying video games or fitness trackers for their children. Sales were also hit by the absence of any major film merchandise release to match the likes of Frozen or Minions in previous years. Sainsbury’s said toys had been particularly disappointing over the festive period. The overall market was down more than 10% as parents switched to buying video games or fitness trackers for their children. Sales were also hit by the absence of a big movie – such as Frozen or Minions in previous years – which would have generated spin-off sales of merchandise.
Sales at Argos, the UK’s biggest toy retailer, fell as a result but Sainsbury’s said it had increased its share of the market. Christmas sales: the winners and losers on the UK high street
Sales were also down in homewares and large electrical goods, while mobile phones, video games and fitness trackers, which are less profitable for retailers, all sold well in a highly promotional non-food market. Sales of homewares and large electrical goods were also down as Sainsbury’s said shoppers had been more cautious with their cash. Mobile phones, video games and fitness trackers all sold well in a highly promotional market – but they are less profitable for retailers.
“There were a lot of retailers in distress and a lot of discounted stock out there,” said Mike Coupe, the chief executive of Sainsbury’s. “We are in business to make money and have to be very thoughtful where we put our promotional spend. Black Friday got a little bit carried away with itself in recent years ... We are pretty pleased with how we managed [2018] in a very tricky market.” “There were a lot of retailers in distress and a lot of discounted stock out there,” said Mike Coupe, the chief executive of Sainsbury’s, which bought Argos in 2016. “We are in business to make money and have to be very thoughtful where we put our promotional spend. Black Friday got a little bit carried away with itself in recent years ... We are pretty pleased with how we managed [2018] in a very tricky market.”
Two-thirds of UK shoppers visited Aldi or Lidl over Christmas The difficulties at Argos reflect wider problems faced by many non-food retailers as shoppers reined in spending on non-essentials before Christmas.
Grocery sales rose 0.4% over the period, a performance the group described as “solid.” Sales were helped by the opening of three new supermarkets, a 6% rise in online sales and 3% increase in sales via Sainsbury’s chain of convenience stores. Coupe said the volume of products sold was similar to the previous quarters and the slowdown reflected much lower price inflation and shoppers switching to cheaper own-label items as they kept a tight rein on spending. The struggling Mothercare chain said its underlying sales slumped by more than 11% in the 13 weeks to 5 January. Its online sales crashed by more than 16% as fewer discounts meant less people visited the group’s website. The baby and maternity chain blamed a tough consumer backdrop.
Despite criticism from some analysts about store standards, which Sainsbury’s admitted had slipped over the summer after some management changes, Coupe said service and availability were back to normal. The fashion retailer FatFace was another poor performer. Its UK store sales were down 6% in the five weeks to 5 January – although it said this was offset by a 16% rise in online sales and a 32% rise in sales overseas.
He said stores had coped despite a bigger than expected last-minute rush which put lots or pressure on stores in the final few days before Christmas. Anthony Thompson, the chief executive of FatFace, said: “Christmas shopping patterns appear to be changing, driven by Black Friday and growing consumer confidence in online delivery speed and availability. This resulted in an even later surge in December sales across our stores.”
“Christmas came late this year,” saidCoupe, as he warned that the consumer outlook “continues to be uncertain”. It was also a tricky year for traditional supermarkets as they lost share to discounters Aldi and Lidl while food price inflation dropped back.
However, Britain’s second-largest supermarkets chain said it is“well placed to navigate the external environment and remain focused on delivering our strategy”. Sainsbury’s grocery sales rose only 0.4% over the period, a performance the group described as “solid”. It was on a par with a 0.6% rise in sales already reported by Morrisons in the nine weeks to 6 January.
The poor figures from Sainsbury’s indicate it suffered the worst Christmas of the major supermarkets, just as it awaits the green light from the competition watchdog for its near-£10bn merger with rival Asda. Sainsbury’s food sales were helped by the opening of three new supermarkets, a 6% rise in online sales and 3% increase in convenience store sales.
Rival Morrisons reported a 0.6% rise in sales over Christmas, while retail market analysts Kantar Worldpanel indicated there were strong sales gains at discounters Aldi and Lidl. “Christmas came late this year,” Coupe said, as he warned that the consumer outlook “continues to be uncertain”.
Richard Lim, chief executive of Retail Economics, said: “These results aren’t disastrous but demonstrate the significant challenges faced by the big grocers. Fiercer competition from the discounters, massive price investment from key competitors and shifting shopper behaviour have created a pressurised trading environment. Market share continues to slip away to the German discounters.
“The decline in non-food reflects the wider slowdown in consumer confidence as cautiousness shown towards discretionary spending. Hard-fought sales in a heavily-discounted environment will put profitability under further pressure.”
J SainsburyJ Sainsbury
Retail industryRetail industry
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